"Both sides face an inconvenient fact: During Obama’s tenure, Wall Street has roared back, even as the broader economy has struggled." The reality of Dodd-Frank "frustrates" claims of both Wall St. and Obama that big banks have been chastened. Obama even added bailouts for derivatives clearinghouses.
Nov. 6, 2011, "Wall Street’s resurgent prosperity frustrates its claims, and Obama’s," Washington Post, Zachary A. Goldfarb
"Profits have also rebounded. The largest banks, including Bank of America, Citigroup and Wells Fargo, earned $34 billion in profit in the first half of the year (2011), nearly matching what they earned in the same period in 2007 and more than in the same period of any other year.
Securities firms — the trading arms of big banks and hundreds of other independent firms — have fared even better. They’ve generated at least
$83 billion in profit during the past 2 and a half years, compared with $77 billion during the entire Bush administration, according to data from the Securities Industry and Financial Markets Association."...
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The NY Times editorialized after the first Romney-Obama debate that Dodd-Frank put a leash on big banks and 'corrosive' derivatives. Maybe Obama didn't mention it because the average person knows that's not true:
10/4/12, "An Unhelpful Debate," NY Times Editorial (after the first Romney-Obama debate)
"Mr. Romney said he supported the idea of regulation but rejected the Dodd-Frank financial reform law because it was too generous to the big “New York banks.” This is an alternative-universe interpretation of a law that is deeply despised and opposed by the banks, but Mr. Obama missed several opportunities to point out
how the law limits the corrosive practices, like derivatives trading, that led to the 2008 crash and
puts in place vitally important consumer protections."...
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Ed. note: Dodd-Frank doesn't do much at all to stop "corrosive derivatives trading" as the NY Times claims. And it makes sense for banks to say they "despise" the law. It takes them off the hot seat, makes people think the banks can't do really bad things anymore, and makes Obama look good. That's appreciated by someone running for office. If banks are making more money with Obama than any time in recent history, they obviously don't "despise" the law:
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The following article says "almost nothing" was done in Dodd-Frank to prevent the same meltdown from happening again including that ratings agencies weren't reformed:
7/26/10, "Obama signs a bill that lets banks have US over a barrel once more," Telegraph UK, by Liam Halligan
"What the US political establishment's non-response to the credit crunch illustrates is this: such is the lobbying power of the big Wall Street institutions that they not only caused a global economic crisis and then forced the US government to pay for a massive bail-out, but then used a slice of that bail-out cash to bribe politicians with campaign donations in order to block rule changes that might prevent a repeat performance.
That leaves the politicians and high-flying bankers happy, of course, while regular citizens – and their children and grandchildren – foot the multi-billion dollar bill....
What we've created, instead, is a group of institutions that between them comprise nothing less than a financial oligarchy. These guys have Western taxpayers over a barrel. And what's alarming is that there is almost nothing in this bill that will stop yet more too-big-to-fail calamities. Mr President, you have missed a historic opportunity and, for that, history's judgment will be severe....
Volcker places limits on so-called "prop" trading without defining what it is, so allowing banks to exploit what they claim is "the grey area between market-making and speculation".
Wall Street firms will also still be able to lever up punters' money and deal in credit-default swaps – the main culprits in the AIG bankruptcy, which cost US taxpayers $182bn and counting – while also destroying Bear Stearns and Lehman. The only stipulation is that ratings agencies should classify such derivates as "investment grade".
Such agencies are unreformed and were at the heart of the last debacle– so that's hardly reassuring.
Last-minute changes mean that banks can, anyway, use 3pc of their tier-one capital for out-and-out speculation, circumventing Volcker. That doesn't sound much, but once levered up 50-times – and such a figure isn't unusual – this huge loophole in Volcker is more than enough to allow investment banks to keep destroying themselves
- in full knowledge the state will pay.
- Limits on leverage – rejected.
- Limits on bank size – rejected.
- delegating them instead to an army of regulators*
have when the details are hammered out behind closed doors.
Obama put the spotlight on the creation of a consumer protection bureau – an attempt, before November's mid-term elections, to make arcane legislation meaningful to the public. Are there limits on credit card interest, ensnaring adjustable rate mortgages or predatory pay-day loans? Nope.
Some other omissions in the bill are breath-taking. There is no mention of Fannie Mae or Freddie Mac – the government-sponsored mortgage-providers that have already cost $145bn in bail-out cash, rising to almost $400bn by 2019.
No mention, either, of capital requirements – which means the global banking system must rely, once again, on the ridiculous Basel process for resolving this crucial issue.
Once again, Obama missed a chance to give a lead when it comes to financial reform.
Based on sound-thinking courageous judgment, the Glass-Steagall legislation was only 17 pages long. Packed with wheezes and loop-holes, Dodd-Frank runs to 2,319 pages. Enough said."
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*Dodd-Frank created a new group of regulators to 'hammer out details.' Details are looking good for banks. 60% of credit default swap dealers are exempt from oversight under D-F. This won't be re-evaluated for 5 years:
4/20/12, "A Dodd-Frank Regulatory Exemption Grows by 7,900%," Bloomberg/Business Week, K. Weise
"For two years, regulators and business tussled over which companies that trade derivatives must submit to strict oversight as part of the Dodd-Frank financial reform. Credit default swaps and other derivatives, of course, were a major cause of the 2008 financial crisis....
This week, the regulators finally settled the issue, and generally the industry won out. Regulators expanded the exemption to include companies that do less than $8 billion in swaps a year—80 times more than the initial proposal. By one estimate, that means 60 percent of swap dealers will now be exempt. Those companies, ranging from banks to energy and agricultural firms, can breathe easier now that they’re exempt. As for what the new rules mean for risk in the market, regulators say they’ll reevaluate in five years, when the threshold defaults down to $3 billion."
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Dodd-Frank even enabled bailouts for 'derivatives clearinghouses.' Taxpayers will now bail out derivatives trading clearinghouses:
5/25/12, "A Mess the 45th President Will Inherit," Wall St. Journal
"President Obama's standard gripe is that the economy has performed so poorly during his term because of the financial crisis he inherited from George W. Bush. But this week it is Mr. Obama who has bequeathed to his successors a landmark in financial regulation. It is bound to haunt them, though not as much as it will haunt taxpayers.
J.P. Morgan's recent trading loss and the resulting Washington blather about tighter regulation have grabbed headlines. Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading—not behind banks that might "...(subscription) "make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.
The authority for this regulatory achievement was inserted into Congress’s pending financial reform bill by then-Senator Chris Dodd.
Specifically, the law authorizes the Federal Reserve to provide “discount and borrowing privileges” to clearinghouses in emergencies.
To get help, they only needed to be deemed “systemically important” by the new Financial Stability Oversight Council chaired by the Treasury Secretary.
Last year regulators finalized rules for how they would use this new power. On Tuesday, they began using it. The Financial Stability Oversight Council secretly voted to proceed toward inducting several derivatives clearinghouses into the too-big-to-fail club. After further review, regulators will make final designations, probably later this year, and will announce publicly the names of institutions deemed systemically important.
We’re told that the clearinghouses of Chicago’s CME Group and Atlanta-based Intercontinental Exchange were voted systemic this week, and rumor has it that the council may even designate London-based LCH.Clearnet as critical to the U.S. financial system.
U.S. taxpayers thinking that they couldn’t possibly be forced to stand behind overseas derivatives trading will not be comforted by remarks from Commodity Futures Trading Commission Chairman Gary Gensler. On Monday he emphasized his determination to extend Dodd-Frank derivatives regulation to overseas markets when subsidiaries of U.S. firms are involved.
If there’s one truth we’ve learned about government financial backstops, it’s that sooner or later they will be used. So eventually taxpayers will have to bail out one derivatives clearinghouse or another. It promises to be quite a mess."
Balance of Wall St. Journal text courtesy of:
5/25/12, "As An Encore to Bailing Out the Big Banks, Government to Backstop Derivatives Clearinghouses … In the U.S. and Abroad," Washington's blog
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12/12/2009, "Drug money saved banks in global crisis, claims UN advisor," UK Guardian, Rajeev Syal, "Drugs and crime chief says $352bn in criminal proceeds was effectively laundered by financial institutions"
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12/10/2009, "Obama's Big Sellout," Rolling Stone by Matt Taibbi
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Ed. note: Other presidents skewed government in banks' favor. The point is Obama has done much worse than others, has done the opposite of what was needed, and at a time when it hurt ordinary Americans the most.
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